Engineering and construction company Punj Lloyd Ltd is looking to divest its stake in its telecom and broadband business, Spectranet.
“We plan to get out of this business. There are a number of companies that have evinced interest in acquiring our stake and at an appropriate valuation we will exit this business. We have set up the network to a scalable size,” said Luv Chahabra, director of corporate affairs at the company. He declined to name the companies with which Punj Lloyd is in talks.
Spectranet is an Internet service provider (ISP) that offers a range of services to business customers. It also tests telecom equipment. It offers these services in New Delhi and its surrounding areas, Mumbai, and Bangalore.
Punj Lloyd, whose engineering and construction business has grown at a rapid pace over the past few years on the back of an expanding economy, is one of the few stand-alone ISPs. The companies in the business are mainly telcos or are affiliated to them.
Harit Shah, an analyst tracking information technology and telecom at Mumbai-based Angel Broking Ltd, said: “The idea behind the move may be to concentrate on its core business which is engineering, procurement and construction, as it could take significant amount of management bandwidth and resources to scale up this business (broadband).”
Arvind Mahajan, executive director at audit firm KPMG, said: “Telecom and broadband has become a big boys’ game. Though the space is growing, Punj Lloyd will have to make significant investments as it is becoming an integrated play as broadband is coming under competition from different quarters. It also requires a lot of specialized skill sets.”
Broadband access allows users to download data and browse Internet services at about 256kb per second and there are only about three million such connections in India.
According to research firm Frost and Sullivan, the Indian market for providing broadband services was estimated to be around Rs1,009 crore by revenues in 2007 and is projected to reach Rs5,123 crore by 2012.
Punj Lloyd posted a net profit of Rs61.5 crore in 2006-07 and has orders worth $5 billion (Rs20,300 crore) on its books. The company is yet to announce its results for 2007-08.